oneok ONEOK to Present at Lehman CEO Conference
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Transcript of oneok ONEOK to Present at Lehman CEO Conference
Lehman Brothers CEO Energy/PowerLehman Brothers CEO Energy/PowerLehman Brothers CEO Energy/Power Lehman Brothers CEO Energy/Power ConferenceConferenceNew York City | September 3, 2008y | p
John W GibsonJohn W GibsonJohn W. GibsonJohn W. GibsonONEOK, Inc. | Chief Executive OfficerONEOK Partners, L.P. | Chairman and Chief Executive Officer
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ONEOK Partners, L.P. | Chairman and Chief Executive Officer
ForwardForward--Looking StatementLooking Statement
Statements contained in this presentation that include company Statements contained in this presentation that include company expectations or predictions should be considered forward-looking statements which are covered by the safe harbor
i i f th S iti A t f 1933 d th S iti d provisions of the Securities Act of 1933 and the Securities and Exchange Act of 1934. It is important to note that the actual results of company earnings could differ materially from those projected in such forward-looking statements. For additional information, refer to ONEOK’s and ONEOK Partners’ Securities and Exchange Commission Filingsand Exchange Commission Filings.
Page | 3
AgendaAgenda
• Overview & VisionOverview & Vision• Diversified Assets• Financial Highlights
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• Key Investment Considerations
Overview & VisionOverview & Vision
Page | 5
ONEOK TodayONEOK Today
• Three business segments
A Premier Energy Company
g– ONEOK Partners -- General
partner and 47.7 percent owner– Distribution -- Three distribution $624 ONEOK PartnersDistribution -- Three distribution
companies serving two million customers
– Energy Services -- A leading $186 Energy Services A leading marketer of natural gas
• Expanding participation in l h i
$142
$186 Distribution
Energy ServicesOther ($3)
energy value chain• $4.6 billion market capitalization Operating Income
2008 Guidance: $949 million
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ONEOK TodayONEOK TodayAssets That Fit and Work Together
ONEOK DistributionONEOK Energy Services
Leased Pipeline CapacityLeased Storage Capacity
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Leased Storage Capacity ONEOK Partners
Growth Projects
Our VisionOur Vision
A premier energy company creating exceptional value for all
A Premier Energy Company
p gy p y g pstakeholders by:• Rebundling services across the value chain, primarily through
ti l i t ti t id t ith i i t vertical integration, to provide customers with premium services at lower costs
• Applying our capabilities — as a gatherer, processor,Applying our capabilities as a gatherer, processor,transporter, marketer and distributor — to natural gas and natural gas liquids…
…and other commodities
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Our Vision: A Journey by DesignOur Vision: A Journey by DesignValue Creation Through Rebundling - 1995
Natural Gas
Marketing
Power Industrial
Distribution
Exploration & Production Gathering & Processing Pipelines/Storage Markets
Refining
Natural Gas Liquids
Petro-Chemical
Refining
Heating
1995 Financial Statistics
Total revenue: $949.9 million
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Pipelines/Storage MarketsGathering & FractionationNet income: $42.8 millionTotal assets: $1.2 billion
Our Vision: A Journey by DesignOur Vision: A Journey by DesignValue Creation Through Rebundling - Today
Natural GasNatural Gas
Power Industrial
MarketingDistribution
Exploration & Production Gathering & Processing Pipelines/Storage Markets
Refining
Natural Gas LiquidsNatural Gas Liquids
Petro-Chemical
Refining
Heating
2007 Financial Statistics
Total revenue: $13.5 billionN t i $304 9 illi
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Pipelines/StorageGathering & Fractionation MarketsNet income: $304.9 millionTotal assets: $11.1 billion
Our Vision: A Journey by DesignOur Vision: A Journey by Design
• Established Mid-Continent presence beginning in 2000
Applying Our Capabilities to the NGL Business
beginning in 2000 • Acquired NGL assets from Koch in
2005– Gained access to largest NGL g
market hubs: Conway, Kansas, and Mont Belvieu,Texas
• Extending our reach into the Rockies and Barnett Shale through ginternal growth projects
– Doubles the business• Acquired NGL and refined petroleum
products system to connect to the products system to connect to the Midwest markets
– Provides producers with access to additional marketsFirst entrance into refined
NGL PipelinesNGL Gathering & FractionationNGL Growth ProjectsAcquired NGL Pipeline System
NGL StorageNGL FractionatorNGL Market Hub
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– First entrance into refined petroleum products market
Our Key StrategiesOur Key Strategies
• Generate consistent growth and sustainable earnings
A Premier Energy Company
g g– Improve profitability of ONEOK Distribution Companies– Continue focus on physical activities at ONEOK Energy Services
D l d t i t ll t d th j t t – Develop and execute internally generated growth projects at ONEOK Partners
• Execute strategic acquisitions that provide long-term valueg q p g• Manage our balance sheet and maintain strong credit ratings at or
above current level• Operate in a safe and environmentally responsible manner• Attract, develop and retain employees to support strategy
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p p y pp gyexecution
Diversified AssetsDiversified Assets
DistributionDistributionEnergy Services
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ONEOK Partners
DistributionDistribution
• Largest natural gas
Eighth Largest Natural Gas Distributor in the U.S.
g gdistributor in Oklahoma and Kansas; third largest in Texas
• GrowthGrowth– Efficient investments– Customers, volumes, rate base
• Long term focus has led to:• Long-term focus has led to:– Unbundling and restructuring
in OklahomaWeather normalization– Weather normalization
– Capital recovery– Bad-debt recovery
Margin stabilityCustomers 2 millionR $2 1 billi
Kansas Gas ServiceOklahoma Natural GasTexas Gas Service
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– Margin stability Revenues $2.1 billionAsset Base $2.7 billionRate Base $1.7 billion
DistributionDistribution
• Return on equity
Integrated Strategy to Improve Profitability
Closing the GapSi ifi t i 2005– 2005: Oklahoma rate case
– 2006: Kansas and Texas rate cases– 2007: Five rate filings in Texas
2008: Texas rate increases of $4 2 ap ap
Gap
Significant progress since 2005
Gap
Allowed
8 5 8 6
10.2
– 2008: Texas rate increases of $4.2 million; Oklahoma filed bad-debt recovery
– Capital recovery mechanisms in allthree statesDisciplined approach to capital
Ga Ga
n on
Equ
ity(%
)
5 3
8.5 8.6
– Disciplined approach to capital investment
• Expense control and recovery– Expense recovery mechanisms
* Ret
urn
4.9 5.3
p y– Continuous process improvement– Pipeline integrity management recovery– Pension and other post-employment
benefit costs
Total Distribution Companies2005 2006 2007 2008G 2008 Allowed
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benefit costs
* ROE calculations are consistent with utility ratemaking in each jurisdiction and not consistent with GAAP returns
Energy ServicesEnergy Services
• Deliver natural gas
Leased Assets Enhance Our Ability to Provide Premium Services to Customers
gtogether with bundled reliable products and services
,
services – Premium, peaking
servicesPrimarily to LDCs– Primarily to LDCs
• Access to prolific supply and high-demand areas
Storage 91 Bcf of capacity
Leased PipelineLeased Storage
• Industry knowledge and customer relationships
Storage 91 Bcf of capacity2.2 Bcf/d of withdrawal rights1.4 Bcf/d of injection rights
Transportation 1.8 Bcf/d of firm capacitySales 3.3 Bcf/d in 2007
3.1 Bcf/d in 2006Margin $0 19/MMBtu in 2007
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Margin $0.19/MMBtu in 2007 $0.22/MMBtu in 2006
Energy ServicesEnergy Services
Storage Transportation Optimization Retail TradingUtilize leased capacity to meet customers’ Enhance storage and Sell natural gas supplies Extract trading
Sources of Income
Utilize leased capacity to meet customers baseload, swing and peaking requirements
Provide marketing and risk management services
Capture arbitrage opportunities
Enhance storage and transportation margins through application of market knowledge and risk management skills
Sell natural gas supplies and provide risk management services to commercial and industrial customers and to consumers who participate in LDC
Extract trading margins around our physical positions through market knowledge, volatility or inefficiencies
participate in LDC customer choice programs
Spread- and demand-based
Spread- and fee-based Spread-, commodity-and derivative-based
Commodity-based Spread-, commodity-and derivative-based
53%11% 10%
27%
6% 7%
53%26%60%27%
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2008 Operating Income Guidance $142 million
2007 Operating Income$205 million
Energy ServicesEnergy Services
• Range from low of $139 million to high of $229 million of operating income
Operating Income History
• Seasonal storage differentials and transportation basis differentials have had the greatest impact
$250$5 00
$139 $166
$229 $205
$142 $
$200
$250
$
$4.00
$5.00
(Milli
ons)
$139 $142
$100
$150
$2.00
$3.00
ratin
g In
com
e
$/MMB
tu
$0
$50
$-
$1.00
2004 2005 2006 2007 2008 Guidance
Oper
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April - December Storage Differential Rockies to Mid-Continent Basis Differential Operating Income
ONEOK PartnersONEOK Partners
• Primary growth engine for ONEOK
Overview
• Aligned interests: ONEOK is general partner and 47.7 percent owner• Value creation through integrated operations• Cash flow is approximately 60 percent fee based
Natural Gas Natural Gas Liquids
PipelinesGathering & Processing Gathering & Fractionation Pipelines
– Stable earnings through diversity– Diversified supply basins, producers and
t t iti t i l tilit
– Connected to over 90 percent of the Mid-Continent region’s processing plantsAllows us to provide full range of services
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contracts mitigate earnings volatility – Allows us to provide full range of services to our customers
ONEOK PartnersONEOK Partners
Distribution Growth
Delivering Consistent Growth and Stable Earnings
Unitholder Return• 10 increases with ONEOK as sole
general partner• Target coverage ratio: 1.05x to 1.15x
• Unit price increase of 25 percent since 2006
• Total return of 71 percent since 2006 137 t i 2003
$67 60$69.26
80%
90%
$60
$70Unit Price Total Return
$1 01 $1.025 $1.04
$1.06 Distributions Per Unit
2006; 137 percent since 2003
$48.00
$57.57
$67.60$61.25 $55.90 $59.77
50%
60%
70%
80%
$40
$50
$60
$0.88
$0.95 $0.97 $0.98 $0.99 $1.00 $1.01
10%
20%
30%
40%
$10
$20
$30
ONEOK P t Al i MLP I d
$0.80
$0.88
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0%$01Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08
ONEOK Partners Alerian MLP Index
1Q06 3Q06 1Q07 3Q07 1Q08 3Q08
*Unit prices are closing prices at last day of quarter; Third quarter 2008 through closing prices on 8/27/08
ONEOK Partners ONEOK Partners -- Roadmap to GrowthRoadmap to Growth$2 Billion of Internal Growth Projects Under Way, 2007-2009
Grasslands plant expansionplant expansion
$40-$45 million Guardian II Expansion
$277-$305 millionFort Union Gas Gathering Expansion
(37% owner)
Piceance Piceance LateralLateral
Overland Pass Pipeline
$575-$590 million
NGL & Refined Product System Acquisition
$300 million
(
Lateral Lateral $110-$140 million NGL Upgrade
Projects $230-$240 million
Woodford Woodford
Midwestern Extension $69 million
Arbuckle Pipeline
$340-$360 million
Natural Gas Gathering & ProcessingNatural Gas PipelinesNatural Gas Liquids Gathering & Fractionation
Extension Extension $30-$35 million
2010 -2015 Internal Growth Projects:$300-500 million/year
l i iti
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Natural Gas Liquids Gathering & FractionationNatural Gas Liquids PipelinesGrowth Projects
plus acquisitions
ONEOK Partners ONEOK Partners –– Growth StatusGrowth Status
MAJOR PROJECTS*: Contracts / Volumes Fee Based Expected In Service
Complement Existing Infrastructure and Core Operating Capabilities
MAJOR PROJECTS : Contracts / Volumes Fee Based Expected In ServiceOverland Pass Pipeline Long-term supply agreement
with Williams Third Quarter 2008
Related NGL projects Infrastructure upgrades to accommodate growth In Serviceg
Arbuckle Pipeline Anchor customers committed Early 2009
Piceance Lateral Dedicated supplies from two Williams plants Second Quarter 2009
D di t d li f DWoodford Shale extension Dedicated supplies from Devonand Antero processing plants In Service
Grasslands Plant expansion Supply growth driven by drilling and production Second Half 2008
Fort Union Gas Gathering expansion (37%) Fully subscribed In Service
Guardian Pipeline extension Anchored by two 15-year agreements Fourth Quarter 2008
Mid t E t i F ll b ib d I S i
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Midwestern Extension Fully subscribed In Service
* Additional project details included in the appendix, slides 52 - 66
ONEOK Partners ONEOK Partners -- Growth ContributionGrowth Contribution
• $2 billion of internal growth
Complements Existing Infrastructure and Core Operating Capabilities
• $2 billion of internal growth projects through 2009– Growth projects generate
EBITDA* Generated
$360 illisignificant cash flow
– Growth EBITDA generated is primarily fee based
$260 million
million
• $300-$500 million of growth projects per year in 2010-2015
• Incremental acquisition 2009 2010• Incremental acquisition opportunities
2009 2010
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* EBITDA contributions assume projects are completed on schedule* Does not include WMB exercising its 50/50 option in OPPL or Piceance Lateral* Offsets natural declines in natural gas gathering and processing supplies
Growth at OKS benefits OKEGrowth at OKS benefits OKEHow Growth at ONEOK Partners Benefits ONEOK
DividendsNet Income
IDR and Equity Income
Higher Distributions
EBITDA Growth
Capital Projects
Unit Price AppreciationUnit Price Appreciation Share Price AppreciationShare Price Appreciation
EBITDAGrowth
OKS Incremental EBITDA is $1 million• Partnership is in “high splits”• All incremental cash flow is distributed• Annual depreciation is $125 thousand
Impacts OKE income by $684 thousand (pre-tax)• $500 thousand* from incentive distribution rights• $184 thousand* in equity earnings from general
partner interest and limited partner units owned
DistributionGrowth
Incentive Distribution Rights*
Limited Partner Units**
Every 1 cent quarterly increase Results in $3.5 million annual increase in cash flow and income before taxes
Page | 24
Every 1 cent quarterly increase Results in $1.7 million annual increase in cash flow
* Assumes “high splits”** ONEOK owns 42.4 million limited partner units
Financial HighlightsFinancial Highlights
Page | 25
Solid Financial PositionSolid Financial PositionStrong Balance Sheet• Strong credit rating
Stable Cash Flow• Continued strong free cash flow • Strong credit rating
– S&P: BBB– Moody’s: Baa2
• Capital Structure
• Continued strong free-cash flow available for:
– Acquisitions– Debt repayment
– Investment in OKS– Share repurchase• Capital Structure
– Goal: 50/50 Capitalization
– Debt repayment– Dividend increases
Capital
– Share repurchase
Total Debt54% Equity
46%
Surplus $180
Capital Expenditures
$182
Dividends $
Stand –Alone Capitalization Stand –Alone Cash Flow
$163
Page | 26
June 30, 2008 2008 Guidance (Millions)
Shareholder ValueShareholder Value
Dividend Growth Shareholder Return
Delivering Consistent Growth and Stable Earnings
• 13 dividend increases since January 2003
• Target: 50-55 percent of
• Share price increase of 32 percent since 2006
• Total Return of 79 percent since recurring earnings 2006; 178 percent since 2003
$51.68$51.68
120%$50
Dividends Per Share Share Price Total Return6 0.38
$0.4
0
$33.06$33.06$38.25$38.25
$43.12$43.12$45.29$45.29
$$$48.53$48.53 $44.63$44.63 $43.63$43.63
60%
80%
100%
$30
$40
9 21
$0.2
3 $0
.25 $0
.28
$0.3
0 $0
.32
$0.3
4
$0.3 $0
0%
20%
40%
$0
$10
$20
S&P 500ONEOK, Inc.
$0.1
55
$0.1
7
$0.1
8 $0
.19
$0. $
Page | 27
0%$01Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08
*Share prices are closing prices at last day of quarter; Third quarter 2008 through closing price on 8/27/08
,
Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007
Key Investment ConsiderationsKey Investment Considerations
• Strong track record of creating value for both customers and g ginvestors, through rebundling services across the value chain and applying our capabilities to other commoditiesSt t i t ti lifi l b i d k k t • Strategic assets connecting prolific supply basins and key markets
• Significant growth potential through continued strategy execution• Demonstrated financial discipline• Demonstrated financial discipline• Experienced and proven management team• Talented workforce dedicated to providing safe and reliable p g
service to all our customers
Page | 28
Questions & AnswersQuestions & AnswersQuestions & AnswersQuestions & Answers
Page | 29
Page | 30
AppendixAppendix
Page | 31
Our Vision: A Journey by DesignOur Vision: A Journey by DesignValue Creation Through Re-bundling – How We Got Here
Acquired NGL and refined petroleum product pipeline
t f Ki d
Acquired Texas Gas Service
Oklahoma Natural Gas and exploration &
production are primary businesses
Acquired Oklahoma gathering and
processing assets from Koch
Acquired Kansas Gas Service and Kansas natural gas pipelines
storage and marketing ,
system from Kinder Morgan
Acquired Conway NGL assets from
Texaco
businesses
1996 1998 2000 2002 2004 2006
Oklahoma Unbundling: Storage & Gathering
deregulated; Distribution & Transmission assets become
separate utilitiesAcquired 85% general partner interest
in Northern Border Partners
Acquired NGL system from Koch
storage and marketing from Western
Resources
Created ONEOK Partners: Dropped down $3 billion of assets to Northern Border
Partners; became sole
Built NGL pipeline from Bushton to
ConwayAcquired NGL storage and fractionation
199519951996
1997
1998
1999
2000
2001
2002
2003
2004
2005
200620072007
Created E S i
Sold and exited exploration &
production business
Partners; became sole general partner
assets from Kinder Morgan
Acquired gathering and processing and natural gas pipeline, storage and
marketing assets in Texas, Oklahoma and Kansas from Dynegy and Kinder
Morgan
Announced $2 billion of internal growth projects at ONEOK
Partners,
2006 — 2008
Energy Services
Page | 32
Sold Texas gathering and
processing assets
g ,$1.4 billion of which are
NGL related
DistributionDistribution
• Synchronized rate filings
Rate Strategy Progress
y g• Maintain positive relationships with regulators
Issue Solution Oklahoma Kansas TexasMargin fluctuations Straight-fixed variable ratesMargin fluctuations Straight-fixed variable rates
Revenue decoupling 1/17Weather normalization 8/17
Earnings lag More frequent filings
C t f i dj t t 8/17Cost of service adjustment 8/17
Bad debt Commodity recovery in PGA Filed 4/17Fixed-price plan 1/17Average payment plan
Financial hedging 7/17Physical hedging
Capital recovery Capital recovery mechanisms 6/17Return on gas in storage 2/17
Page | 33
Incentive rates Revenue sharing 2/17
Energy ServicesEnergy Services
• Contract with customers to deliver natural gas, together with
What We Do
g , gbundled, reliable products and services
• Contract for natural gas supplies• Lease and optimize storage and transportation capacity• Capitalize on market irregularities and inefficiencies
g ptim
izatio
n
MarketsTransportationStorageSupply
Trad
ing
Op
• LDC • Electric Generators
• Trading Counterparties
Retail Customers:• Industrial• Commercial• Residential
Page | 34
ONEOK PartnersONEOK Partners
Diversified AssetsDiversified Assets
Page | 35
ONEOK PartnersONEOK Partners
• One of the largest publicly
Overview
g p ytraded MLPs
• Diversified asset base and t bl h fl
$269 Natural Gas Gathering & Processing
stable cash flows• Value creation through
integrated operations$142 Natural Gas
Pipelinesintegrated operations• Aligned interests:
– ONEOK: General Partner$68
$153 NGL Gathering & Fractionation
NGL Pipelines
– ONEOK: 47.7 percent owner• $5.4 billion market capitalization
$
Operating Income2008 Guidance: $624 million
Other ($8)
Page | 36
ONEOK PartnersONEOK PartnersOverview
Natural Gas Gathering & ProcessingNatural Gas PipelinesNatural Gas Liquids Gathering & Fractionation
Page | 37
Natural Gas Liquids Gathering & FractionationNatural Gas Liquids Pipelines
Strong Balance SheetStrong Balance Sheet
• $1 billion revolver
Disciplined Approach to Raising Capital for Growth
• Capital structure $1 billion revolver – Funds 2008 capital expenditures
• Common unit offering in
Capital structure – Goal: 50/50 capitalization– Strong credit rating
EquityDebt
gMarch 2008, generating net proceeds of $460 million
50%50%• Permanent debt financing of $600 million in S t b 2007September 2007
Capitalization: June 30, 2008
Page | 38
Stable Cash FlowStable Cash Flow
• Predominantly fee based
Cash Flow Stability Managed Within Each Segment
y– Large growth projects under way increase fee-based income
• Commodity and spread risk is measured and managed – 2008: 74 percent hedged on NGLs and condensate at $1.38/gallon and 54 2008: 74 percent hedged on NGLs and condensate at $1.38/gallon and 54
percent on natural gas at $9.35/MMBtu – 2009: 30 percent hedged on NGLs and condensate at $2.22/gallon
Fee60% Commodity
27%Spread
Fee55%
Commodity29%
SpreadSpread13%
2007 Gross Margin: $896 million
Spread16%
2008 Gross Margin Guidance: $1.1 billion
Page | 39
2007 Gross Margin: $896 million 2008 Gross Margin Guidance: $1.1 billion
Natural GasNatural Gas
• Connect raw natural gas production from the wellhead to k t th h
What We Do
markets through:– Gathering and compression via extensive pipeline systems– Processing and treating to remove contaminants and extract natural gas liquids– Storage services through underground caverns– Transportation of residue natural gas via extensive pipeline systems, both intra-
and inter-state
MarketsStorage & Transportation
Gathering & Processing
Supply
Distribution Marketing Power / Industrial
Page | 40
Natural GasNatural Gas
• Two segments
Stable Earnings Through Diversity
Grasslands Plant E i
– Natural Gas Gathering & Processing
– Natural Gas Pipelines
ExpansionGuardian II Expansion
• Diversified supply basins producers and contracts mitigate earnings volatility in
Fort Union Gas Gathering Expansion
,
gathering and processing• Earnings on pipelines are fee
basedMidwestern Extension
• More than $600 million of internal growth projects under way through 2009 Natural Gas Gathering Pipeline
Nat ral Gas Interstate Pipeline
Page | 41
y gNatural Gas Interstate PipelineNatural Gas Intrastate PipelineNatural Gas Storage Natural Gas Processing PlantGrowth Projects
Natural Gas Gathering & ProcessingNatural Gas Gathering & Processing
Stable earnings through diversity
Key Points
Willistong g y• Multiple producing basins
effectively offset natural volume declines Wind River
Powder Riverdeclines• Supply mix between small and
large producers spreads drilling and volume exposureand volume exposure
• Makeup of contract portfolio: – Eliminates material exposure to
t l i fl t tiAnadarko
Kansas UpliftHugoton
Natural Gas Gathering PipelineNatural Gas Processing Plant
natural gas price fluctuations– Spreads NGL exposure among
six products and revenue streams
Gathering 14,300 miles of pipeProcessing 13 active plants
0.7 Bcf/d capacityProduction Second-quarter 2008
1,185 BBtu/d gathered651 BBtu/d processed40 MB d NGL ld40 MBpd NGLs sold
Page | 42
Natural Gas Gathering & ProcessingNatural Gas Gathering & Processing
• Strong supply focus
SupplyGas Gathered *
BBtu/dg pp y• New well connects and
growth in the Rockies offset t l d li
1,1711,1681,1821,190 1,188
natural declines910 908 852 800 805
280 274 316 371 383 280 274 316
2004 2005 2006 2007 2008
R k M i Mid C i
Year-to-date
Page | 43
Rocky Mountain Mid-Continent* Volumes based on existing asset base
Natural Gas Gathering & ProcessingNatural Gas Gathering & Processing
• Contract restructuring has reduced commodity price sensitivity and increased fee-based business• Hedging strategy focuses on long NGL and natural gas positions
Risk Mitigation
g g gy g g p– Second half 2008: 74 percent hedged on NGLs and condensate at $1.38/gallon and 54 percent on
natural gas at $9.35/MMBtu – 2009: 30 percent hedged on NGLs and condensate at $2.22/gallon
19% 15% 10% 6% 1% 1%3% 3% 3% 6% 8% 7% $4.8 $4.5
$3.8
$2 1
Commodity Price SensitivityMargin Impact ($ Millions)
Contract Mix by Volume
25% 31% 34%27% 30% 32%
$1 6
-$0.1 $0.3 $0.2
$2.1$1.7 $1.6$1.1 $1.3 $1.0
$0.4 $0.5 $0.7
52% 51% 53%61% 61% 60%
2003 2004 2005 2006 2007 2008
Commodity Sensitivity
-$3.5-$2.7
-$1.6
2003 2004 2005 2006 2007 2008GFee Based Percent of ProceedsKeep Whole Keep Whole w/conditioningPage | 44
Commodity SensitivityNatural Gas Liquids 1 cent/gallon increase
Natural Gas 10 cent/MMBtu increase
Crude Oil $1/barrel increase
Natural Gas PipelinesNatural Gas Pipelines
• Provides fee-based income
Key Points
Viking Gas Transmission
– Over 70 percent is demand/firm• Pipelines connect to key supply
aggregation points:G ardian Viking and Northern Guardian
Northern Border Pipeline
Transmission
– Guardian, Viking and Northern Border
• Midwestern Gas acts as a hub, offering numerous
Midwestern Gas Transmission
Pipeline
, ginterconnects for receipts and deliveries
• Storage provides premium “swing” i f i t t t i liservices for intrastate pipelines
• Intrastate pipelines are diversified through connections to numerous supply and market points
Natural Gas Interstate PipelineNatural Gas Intrastate PipelineNatural Gas Storage
Pipelines 6 920 miles 5 3 Bcf/d peak capacity
Page | 45
supply and market points Pipelines 6,920 miles, 5.3 Bcf/d peak capacityStorage 51.6 Bcf active working capacityEquity Investment 50% Northern Border Pipeline
Natural Gas LiquidsNatural Gas Liquids
• Connect raw-blended NGL production from gas processing plants to markets
What We Do
through:– Gathering via extensive pipeline systems– Fractionating to convert raw-blended NGLs to purity products
Storage services through underground caverns– Storage services through underground caverns– Marketing NGL products to end-users– Distributing purity product to markets
imiza
tion
imiza
tionMarkets
Gathering & Fractionation Storage Distribution
Opt
Opti
Petrochemical Heating RefiningNGLs EthanePropaneIsobutane
Normal ButaneNatural Gasoline
Purity Products
Page | 46
Natural Gas LiquidsNatural Gas Liquids
• Two segments
Largest Gatherer and Fractionator of NGLs in the Mid-Continent
– NGL Gathering & Fractionation– NGL Pipelines
• Connected to over 90 percent
Overland Pass Pipeline
Overland Pass Pipeline
pof the Mid-Continent region’s processing plants
• Allows us to provide a full range
Piceance Lateral
NGL Upgrade
Piceance Lateral
NGL Upgrade p gof services to our customers
• Integrated asset base creates opportunities for growth through
NGL Upgrade Projects
NGL Upgrade Projects Woodford Extension
major expansions into new supply areas– More than $1.4 billion of internal
th j t d
Arbuckle PipelineArbuckle Pipeline
NGL PipelinesNGL Gathering & Fractionation
NGL StorageNGL Fractionator
growth projects under way through 2009
gNGL Growth Projects NGL Market Hub
Page | 47
NGL Gathering & FractionationNGL Gathering & Fractionation
• Extensive raw NGL gathering t ith t 78
Key Points
system with access to 78 gas processing plants
• Mid-Continent supply growth since July 2005: July 2005: – Gathering volume up 31 percent– Fractionation volume up 20 percent– Fifteen new gas processing plant g g
connections completed• New supply commitments drive
infrastructure upgrades and expansions NGL Gathering Pipeline
NGL Stexpansions– Rockies– Barnett Shale– Woodford Shale
Gathering 2,570 miles of pipeFractionation 399,000 Bpd capacity
NGL StorageNGL FractionatorNGL Market Hub
Isomerization 9,000 Bpd capacityStorage 24.6 MMBbls capacity
Page | 48
NGL Gathering & FractionationNGL Gathering & Fractionation
• Volume growth since acquisition of Koch’s NGL system in July 2005
Supply
g q y y– New processing plant connections– Growth from existing connections
246246251251 253253
370370385385 391391
371371
Gathering VolumeMBpd
Fractionation VolumeMBpd
213213208208 210210 210210
224224232232
309309
275275 281281
333333 326326312312 319319
349349370370 371371
p 31
%p
31%
p 20
%p
20%
193193 189189 193193
3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08
Up
Up Up
Up
Page | 49
Q Q Q Q Q Q Q Q Q Q Q Q
NGL Gathering & FractionationNGL Gathering & FractionationSources of Margin
Exchange and Optimization Isomerization MarketingStorage Services Optimization Isomerization Marketing
Gather, fractionate, transport and store NGLs and deliver to market hubs
Obtain highest product price by directing product movement between Conway and Mont Belvieu
Convert normal butane to isobutane
Purchase approximately one-half of exchange volumes in the Mid-Continent for resale on an index-related basisand Mont Belvieu on an index related basis
Fee-based Spread-based Spread-based Fee- and Commodity-based
73%8%6% 13%70%18%
4% 8%
2007 Gross Margin Contribution$206 million
2008 Gross Margin Guidance$260 million
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$206 million $260 million
NGL PipelinesNGL Pipelines
• Links key NGL market centers
Key Points
at Conway, Kansas, and Mont Belvieu, Texas
• Connects Mid-Continent to upper Midwest
• Significant supply sources in Mid-Continent– Connected to 23 gas processing
plants with access to another 55– Connected to seven
fractionatorsfractionators• Regulation
– FERC-approved tariffsNGL PipelineNGL Market Hub
Distribution 3 350 miles of pipe withDistribution 3,350 miles of pipe with 434,000 Bpd capacity
Gathering 720 miles of pipe with 93,000 Bpd capacity
Page | 51
ONEOK PartnersONEOK Partners
Growth ProjectsGrowth Projects
Page | 52
ONEOK Partners ONEOK Partners -- GrowthGrowth
• $2 Billion of internal growth
Complements Existing Infrastructure and Core Operating Capabilities
$2 Billion of internal growth projects under way, 2007-2009
• Growth EBITDA* generated is $84
$1,314
....................Capital Expenditures....................
primarily fee based– 2009: $260 million– 2010: $360 million $
In M
illio
ns
$1,230 $60 $710
$285
$300-$500/year2010: $360 million
• $300 - $500 million of growth projects indentified per
2010 2015
$650
$210 $75
2007 2008 2009 2010-2015
$285
year, 2010-2015 Maintenance Growth
Page | 53
* EBITDA contributions assume projects are completed on schedule* Does not include WMB exercising its 50/50 option in OPPL or Piceance Lateral* Offsets natural declines in natural gas gathering and processing supplies
Natural Gas Gathering & ProcessingNatural Gas Gathering & Processing
Grasslands Processing Plant Expansion
Growth Projects
Plant ExpansionProject Status
Costs $40 - $45 Million
Completion Dates
On line in phases by second half 2008
Phase 1 Phase 2
Grasslands Expansion
Processing plant tie-ins completed
Permits approved
Construction completed
Equipment ordered
Phase 1: Processing Increased from 63 to 100 MMcf/d capacity
Phase 2: Fractionation Increased from 8 to 12 MBpd capacity
Page | 54
Natural Gas Gathering & ProcessingNatural Gas Gathering & ProcessingGrowth Projects
Fort Union Gas GatheringP j t St tProject Status
Costs $120 - $130 Million (Project Financed)
Completion Dates In ServiceDates
Phase 1 Phase 2
Customerscommitted *
Customerscommitted *
Constructioncomplete
Constructioncomplete
In service 11/07 In service 7/08ONEOK Partners GatheringFort Union (37%)Lost Creek (35%)Bi H (49%)
• Backed by volume commitments *• Doubled capacity
Big Horn (49%)
Fort Union Gas GatheringPhase 1: Adds 44 miles of pipe and 200 MMcf/d capacity
Phase 2: Adds 104 miles of pipe and 450 MMcf/d capacity
Page | 55
Natural Gas PipelinesNatural Gas Pipelines
Guardian Pipeline
Growth Projects
Project Status
Costs $277 - $305 Million
Completion Date
• Notice to Proceed received May 2008• In service during fourth quarter 2008
Customerscommitted * Pipe ordered
Right of way possession Pipe delivered
Permits Construction contracts let
• Fully subscribed *• Anchored by two 15-year agreements *
Guardian PipelineCapacity Incremental of 537 MMcf/d to eastern WisconsinExtension 119 miles from Ixonia to Green Bay
Existing PipelineProposed Extension
Page | 56
Extension 119 miles from Ixonia to Green Bay
NGL PipelinesNGL PipelinesGrowth Projects
Overland Pass Pipeline
Project StatusCost $575 - $590 Million
Completion Date
Partial start-up in third quarter 2008, remaining in fourth quarter 2008
OpalEcho Springs
Date remaining in fourth quarter 2008
Anchor customers committed *
Pipe ordered
Public right of i d
Constructiont t l t
Overland Pass Pipeline
Overland Pass Pipeline
way acquired contracts let
Permit approved and federal right of way acquired
730 miles
Construction complete
Overland Pass Pipeline
Pipeline 760 miles, 14-16”
Capacity • 110,000 Bpd of raw NGLs with two pump stations
• Expandable to 255,000 Bpd with additional pump stations
• 99/1% joint venture with 50/50 option within two years of first flow
• Dedicated supplies from two Williams plants (~60,000 Bpd) in WamsutterArea and two Williams plants in Piceance Basin (~30,000 Bpd) *
• Additional commitments of 110,000 Bpd in various stages of negotiation
Page | 57
Overland Pass PipelineOverland Pass Pipeline760-Mile Natural Gas Liquids Pipeline from Opal, Wyoming, to Conway, Kansas
Page | 58
Overland Pass PipelineOverland Pass Pipeline760-Mile Natural Gas Liquids Pipeline from Opal, Wyoming, to Conway, Kansas
Page | 59
NGL PipelinesNGL PipelinesGrowth Projects
Piceance Lateral
Cost $110 - $140 Million
Completion Second Quarter 2009
Project Status
Date Second Quarter 2009
Anchor customers committed *
Late2008
Permitting expected
I Right of way Mid ConstructionIn progress g yacquired 2008 contracts let
• 99/1% joint venture with 50/50 option within two years of first flow
• Dedicated supplies from two Williams plants (~30,000 Bpd) *Overland Pass PipelinePiceance Lateral
Piceance LateralPipeline 150 miles, 14”Capacity 100,000 Bpd of raw NGLs
• Additional commitments in various stages of negotiation
Page | 60
Natural Gas LiquidsNatural Gas LiquidsGrowth Projects
Infrastructure Upgrades
Cost $230 - $240 Million
Project Status
Infrastructure Upgrades
Bushton Fractionator
Expand facility from 80,000 to 150,000 BpdPhase I - complete
• Phase II - third quarter 2008
Bushton StorageUpgrade facility to accommodate additionalethane/propane mix
Construction complete
Bushton-to-Medford Pipeline
Construct 135-mile pipeline with a capacity of 120,000 Bpd of ethane/propane mix
Construction complete
Sterling Expansion Expand pipeline by 60,000 BpdConstruction completeg p Construction complete
Bushton-to-Conway Expansion
Expand pipeline by 14,000 BpdConstruction complete
NGL Gathering & FractionationNGL PipelinesNGL Storage
Page | 61
NGL FractionatorNGL Market Hub
NGL Infrastructure UpgradesNGL Infrastructure UpgradesBushton, Kansas
Page | 62
NGL Infrastructure UpgradesNGL Infrastructure UpgradesBushton, Kansas
Page | 63
NGL Gathering & FractionationNGL Gathering & FractionationGrowth Projects
Woodford Shale Pi li E t i
Cost $30 - $35 Million
Project Status
Pipeline Extension
Completion Date In Service
Anchor customers committed *
Pipe delivered
Right of way acquired
Construction complete
• Connecting to two processing plants, operated by Devon
NGL Gathering PipelineWoodford Extension g p g p , p y
Energy and Antero Resources, in southeast Oklahoma
Woodford Shale Pipeline Extension
NGL StorageNGL FractionatorNGL Market Hub
Page | 64
Pipeline 78 miles, 6-8”Expected Volume 25,000 Bpd of raw NGLs
NGL PipelinesNGL PipelinesGrowth Projects
Arbuckle Pipeline
Cost $340 - $360 Million
Completion
Project Status
Completion Date Early 2009
Anchor customers committed *
Pipe delivered
In progress Right of way acquired In progress Construction
• Expect approximately 65,000 Bpd at start up, and indications of interest that could add 145,000 Bpd of supply within the next three to five years
NGL Gathering PipelineNGL PipelineNGL Arbuckle PipelineNGL Storage
supply within the next three to five years• Major expansion into one of the most active drilling areas
in the U.S. • Allows delivery to Gulf Coast fractionatorsArbuckle Pipeline
Pipeline 440 miles, 12-16”Capacity • 160 000 Bpd of raw NGLs with four pump
NGL FractionatorNGL Market Hub
Page | 65
Capacity • 160,000 Bpd of raw NGLs with four pump stations
• Expandable to 210,000 Bpd with additional pump stations
NGL PipelinesNGL PipelinesStrategic Acquisition
NGL d R fi d P t l
Project Status
NGL and Refined PetroleumProducts System Acquisition
Cost $300 Million
Closing Date October 2007
Geographically and in NGL Value Chain:
Footprint Expansion
• Connects Bushton and Conway, Kansas,to Chicago, Illinois
• Adds a refined petroleum products line to our portfolio
Revenues > 90% fee-basedNGL PipelinesNGL Gathering & Fractionation
• First entrance into refined petroleum products market
• Creates growth opportunities in Midwest markets
NGL GrowthAcquired NGL Pipeline SystemNGL StorageNGL FractionatorNGL Market Hub
Page | 66
Pipelines 1,627 miles, primarily 8-10”Capacity for Purity & Refined Products
134,000 Bpd of transport 978,000 Bbl of storage